Today's Edition
BATOOL GHAITH (ALETIHAD)
UAE banks are entering the next phase of growth from a position of strength, supported by healthy lending demand, strong capital levels and resilient asset quality, according to experts.
Sam Gidoomal, Managing Director and Head of Middle East Financial Services at Alvarez and Marsal, said the clearest message from recent sector performance is continued resilience.
“The key takeaway for the year to date is the continued resilience of the UAE banking sector,” Gidoomal told Aletihad.
He said that despite a more complex environment, banks continued to expand their balance sheets, with loans increasing 4.2% quarter-on-quarter, while asset quality remained strong and capital and liquidity buffers stayed comfortably above regulatory requirements.
Gidoomal said those fundamentals leave banks well-placed to continue supporting economic activity.
“Continued credit demand, strong capitalisation and sound asset quality all point to solid underlying fundamentals,” he said.
Dr Wissam El Khoury, Associate Dean of the School of Business at the American University in Dubai and a wealth and investment consultant, also described the sector’s performance as constructive.
“The significance is not simply that balance sheets became larger, but that banks maintained the financial capacity to support customers while managing risk,” El Khoury told Aletihad.
Loan growth continued to outpace deposit growth during the quarter, with loans rising 4.2% compared with 2.3% for deposits.
Gidoomal said UAE banks continue to operate from a strong liquidity position, supported by established deposit franchises and diversified funding profiles.
“The focus going forward will be on maintaining an appropriate balance between credit growth and funding,” he noted.
El Khoury said the same trend highlights the importance of disciplined funding as banks continue expanding their lending activities, “continued lending growth needs an equally disciplined funding strategy,” he explained.
He said the priority is to match financing growth with stable and competitively priced funding, while preserving the capacity to support customers.
Both experts also pointed to the importance of recurring revenues, cost discipline and sound credit management in supporting continued profitability.
Sector net income increased 2.7% quarter-on-quarter, while net interest income also grew during the period, according to Alvarez and Marsal’s latest UAE Banking Pulse.
Gidoomal said the sector’s underlying earnings profile remained resilient, supported by stable fee and commission income and continued strength in asset quality.
“Looking ahead, the strength of recurring core revenues, disciplined cost management and continued asset-quality management will be important in supporting sustainable profitability,” he said.
Abu Dhabi’s major banks also demonstrated different but complementary areas of strength. First Abu Dhabi Bank remained the largest bank by assets among the peer group, at approximately Dh1.409 trillion, while continuing to lead on operating efficiency with a cost-to-income ratio of 21%.
Abu Dhabi Commercial Bank recorded healthy lending growth, while Abu Dhabi Islamic Bank posted net loan growth of 6.4% and the highest return on equity among the banks analysed, at 27.9%.
Gidoomal said the results highlight the depth and diversity of Abu Dhabi’s banking market.
“FAB continues to leverage its scale and strong operating efficiency, while ADCB and ADIB have delivered healthy lending growth within different segments of the market,” he said.
He added that the market benefits from a combination of scale, growth, Islamic banking capabilities and domestic and international lending expertise.
El Khoury said the banks’ different approaches reflect distinct strategies for allocating capital and building customer relationships.
“The constructive message is the breadth of capabilities within Abu Dhabi’s banking market,” he said.
He added that strong banking relationships create value on both sides of the balance sheet, through the customers banks finance and those who place their deposits with them.
Positive Outlook for 2027
Looking ahead, both experts remain constructive on the sector’s prospects, Gidoomal said UAE banks enter the next period with robust capital and liquidity, resilient asset quality and healthy financing demand across the economy.
He also pointed to continued investment in transport infrastructure, ports, pipelines and supply-chain diversification as structural drivers of credit demand.
“The fundamentals remain supportive, and to date, the sector has demonstrated its ability to adapt effectively to the changing market conditions,” he said.
El Khoury also expects lending growth and healthy profitability to continue, supported by financing opportunities across sectors including energy, transport, logistics, infrastructure, tourism and artificial intelligence.
“My outlook is constructive because the opportunity is not simply to lend more, but to convert financing demand into durable earnings while preserving the capacity to support the economy through changing conditions,” he added.
